Exclusive: Mexico may force Slim's America Movil to separate fixed unit - sources

MEXICO CITY (Reuters) - Mexico’s telecoms regulator has discussed forcing billionaire Carlos Slim to legally separate part of his fixed-line unit Telmex from the rest of the company, people familiar with the matter said, a move that would intensify antitrust rules against the company.

Mexican billionaire Carlos Slim speaks during a news conference in Mexico City, Mexico January 27, 2017. REUTERS/Edgard Garrido

Late on Monday, the regulator's seven-person board voted on whether to toughen, maintain or loosen rules against America Movil AMXL.MX and broadcaster Grupo Televisa TLVACPO.MX, according to the three people, who declined to be named as deliberations were not public.

Reuters could not confirm whether they decided to force Slim’s company to separate off part of Telmex. However, two of the sources said they expected the proposal was on the table.

Representatives of America Movil and Televisa declined to comment. A spokesman for the regulator confirmed there was a board meeting on Monday but declined to elaborate.

The measure, which was considered internally in recent weeks and months, would mean that the Federal Telecommunications Institute (IFT) does not believe antitrust measures against the company are enough to generate competition.

Competitors complain that current rules intended to make America Movil rent out infrastructure to rivals are not working. A move to legally separate some of Telmex would go a step further in prising open the network.

Slim took a stake in Mexico’s former state monopoly, Telmex, in 1990. Two decades of weak regulation and a lack of competition helped catapult him to the top of the list of world’s richest people for several years.

The separation proposal would not force America Movil to sell anything, but it would have to separate part of the infrastructure its fixed-line unit into a different legal entity, with certain independence in decision making, one of the sources said.

A separate observer, who is an industry expert, said there were different ways to do a legal separation. “The devil is in the detail,” said Elisa Mariscal, an adjunct professor at Mexico’s CIDE University. “It might sound strong but the issue is how it’s implemented.”

An announcement on the dominance rules is not expected until several days after Monday’s vote, as the IFT must first notify the companies.

It will come more than three years after Mexico’s president pushed through reforms designed to curb Slim’s dominance of the local telecommunications market.

The profit margin of America Movil, Latin America’s largest phone company, has shrunk from more than 45 percent to less than 30 percent since the reform.

Depending on the results of the revision, America Movil has said it plans to apply for a TV license at home, which Telmex has been prevented from doing since its 1990 privatization.

Shares in America Movil were down on Tuesday, falling slightly more after the news, before recovering to close down 0.78 percent.

A similar measure was proposed by British telecommunications regulator Ofcom to force BT Group Plc BT.L to legally separate its broadband division Openreach, one of the people said.

Both Slim’s America Movil and broadcaster Grupo Televisa, the country’s dominant broadcaster, have been facing a review by the IFT over whether limits placed on them in 2014 have been creating a more even playing field.

Earlier in February, Francisco Hernandez, leader of the telephone workers union at Telmex, posted a video in which he said he had heard the company was considering splitting itself in two, and that the union did not agree.

(This story corrects to show that measure considered is to force separation of part of Telmex, not whole unit.)

Reporting by Christine Murray; Editing by Frank Jack Daniel and Matthew Lewis